Farmland sales and auctions across Iowa could reach their highest levels in years, one agricultural real estate firm estimates, as depressed commodity prices and increasing interest rates give landowners reason to sell.
Troy Louwagie, a farmland broker with Hertz Real Estate Services in Mount Vernon, said listings with the company have increased anywhere from 10 to 25 percent, depending on the area of the state. Louwagie said his own sale portfolio currently has 15 properties for sale, compared to five this time last year.
Land values have stayed relatively high because of the scarcity of acreage available for purchase. However, years of tight margins, low commodity prices and worries over trade disputes between the U.S. and several major trading partners have made selling farmland a more viable option.
Wendong Zhang, an Iowa State University economist and lead researcher for the Iowa Land Values Survey, said the amount of farmland for sale in the state has ranged between one-half to three-quarters of a percent in the past few years, but he expects to see that number rise toward 1 percent.
That financial stress is giving retirement-age landowners a reason to put their property on the market, as Zhang said estate sales are becoming more common.
“Back in 2011 and 2012, a lot of people wanted to continue farming because they’re making good profits or because farming is fun,” he said. “But over the next couple years, we’re seeing low to negative margins, which make a lot people rethink if they want to keep doing it.”
Zhang believes only a small portion of those new sale listings are from cash-strapped farmers looking to downsize or leave the industry altogether. That could change if trade tensions between the U.S. and its trading partners continue to escalate through next year, adding more pressure on producers already struggling with low margins.
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Landowners bordering metro areas in the Corridor and across the state are also selling to developers, usually using those sales proceeds to buy farmland elsewhere and avoid capital gains taxes.
“The development world has really been rocking and rolling right now, with Iowa City, Coralville, North Liberty, Cedar Rapids, Marion,” Louwagie said. “Anywhere you go, there’s dirt being moved and development going on.”
The expected increase of land available to buy, along with rising interest rates and declining profit margins, signals a likely dip in farmland valuations over the next several months. Zhang expects to see prices fall less than 5 percent over the next year or so.
But Louwagie said demand for farmland still is strong, especially as corn and soybean yields have reached near-record or set record highs in the past few years.
“What’s crazy is that every farm I have for sale, I still have somebody wanting to buy that farm, maybe not at the price I want, but they’re still making an offer on it,” he said.
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